John Wiley & Sons, Inc.'s (NYSE:WLY) Share Price Not Quite Adding Up

John Wiley & Sons, Inc.'s (NYSE:WLY) price-to-sales (or "P/S") ratio of 1.5x may not look like an appealing investment opportunity when you consider close to half the companies in the Media industry in the United States have P/S ratios below 0.9x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

Check out our latest analysis for John Wiley & Sons

What Does John Wiley & Sons' P/S Mean For Shareholders?

John Wiley & Sons hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. If not, then existing shareholders may be extremely nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on John Wiley & Sons.

What Are Revenue Growth Metrics Telling Us About The High P/S?

There's an inherent assumption that a company should outperform the industry for P/S ratios like John Wiley & Sons' to be considered reasonable.

Retrospectively, the last year delivered a frustrating 7.9% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 8.6% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 8.0% during the coming year according to the lone analyst following the company. Meanwhile, the broader industry is forecast to expand by 4.9%, which paints a poor picture.

With this in mind, we find it intriguing that John Wiley & Sons' P/S is closely matching its industry peers. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh heavily on the share price eventually.

The Bottom Line On John Wiley & Sons' P/S

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

For a company with revenues that are set to decline in the context of a growing industry, John Wiley & Sons' P/S is much higher than we would've anticipated. Right now we aren't comfortable with the high P/S as the predicted future revenue decline likely to impact the positive sentiment that's propping up the P/S. Unless these conditions improve markedly, it'll be a challenging time for shareholders.

Before you settle on your opinion, we've discovered 2 warning signs for John Wiley & Sons that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.